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Treasury yields (^TYX, ^TNX, ^FVX) and the US dollar (DX=F, DX-Y.NYB) pulled back after the CPI report met expectations, with December CPI rising 0.4% monthly and 2.9% annually. Core CPI increased 0.2% month over month and 3.2% year over year.
Brij Khurana, Wellington Management fixed income portfolio manager, joins Catalysts to explain how the bond market’s reaction is justified.
"It was a very good print," Khurana shares. "Core CPI, as you mentioned, came in at 0.2% month over month; that's the lowest we've seen in the last five months."
Khurana highlights that the report showed things "that were disinflationary" across many items, with only two surprises: higher airline prices due to a strong December and rising used car prices, potentially linked to fall hurricanes.
Additionally, Khurana discusses uncertainties around fiscal policies and their impact.
"I think it's still too early to call [whether we've seen a peak in yields] just because we don't know what the administration's plans are in terms of fiscal spending," Khurana says. "If they really do a lot more fiscal spending, that's an environment where I think yields are going to test those levels."
To watch more expert insights and analysis on the latest market action, check out more Catalysts here.
This post was written by Josh Lynch